Safco Products Co. v. WelCom Products, Inc., Civil No. 08-4918 (JRT/JJG)

• Decision Date: 03 August 2010
• Docket Number: Civil No. 08-4918 (JRT/JJG)
• Parties: SAFCO PRODUCTS CO., Plaintiff, v. WELCOM PRODUCTS, INC.; John Evanthes; Kerry Welsh; and Yang Jian Shunhe Industrial Co., Ltd., Defendants.
• Court: U.S. District Court — District of Minnesota

730 F.Supp.2d 959

SAFCO PRODUCTS CO., Plaintiff,

v.WELCOM PRODUCTS, INC.; John Evanthes; Kerry Welsh; and Yang Jian Shunhe Industrial Co., Ltd., Defendants.

Civil No. 08-4918 (JRT/JJG).

United States District Court, D. Minnesota.

Aug. 3, 2010.

Thomas J. Donovan, Barnes & Thornburg LLP, Chicago, IL, for Plaintiff.

James R. Hietala, Jr. and Dennis C. Bremer, Carlson Caspers Vandenburgh & Lindquist, Minneapolis, MN, for Defendants.

MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS' MOTION TO DISMISS

JOHN R. TUNHEIM, District Judge.

Plaintiff Safco Products Co. alleges that WelCom Products, Inc., Kerry Welsh, John Evanthes, and Yang Jian Shunhe Industrial Co. (collectively, "defendants"), directly infringed, contributorily infringed, and/or induced the infringement of United States Patent No. D522,708. After the parties completed jurisdictional discovery regarding the individual defendants' contacts with Minnesota and WelCom's observance of corporate formalities, Welsh and Evanthes filed a motion to dismiss for lack of personal jurisdiction and for improper venue. For the reasons discussed below, the Court denies the motion.

BACKGROUND

Safco Products, Co. ("Safco") is a Minnesota corporation with its principal place of business in Minneapolis, Minnesota. (First Am. Compl. ¶ 1, Docket No. 43.) On June 6, 2006, Thaler International ("Thaler") obtained United States Patent No. D522,708 (the "'708 patent") for a particular folding pushcart. ( Id. ¶ 10.) On November 23, 2007, Thaler transferred all rights and interest in the '708 patent to Safco. ( Id. ¶ 11.) Safco markets and sells carts that fall within the scope of the '708 patent. ( Id. ¶ 13.)

WelCom Products, Inc. ("WelCom") is a California corporation with its principal place of business in California. ( Id. ¶ 2; Answer to First Am. Compl. ¶ 2, Docket No. 44.) Kerry Welsh is WelCom's President and owns 81% of the company. (Welsh Dep.¹ at 27, Wappel Aff., Ex. K, Docket No. 71.) John Evanthes is WelCom's Vice President of Sales and owns the remaining 19% of the company. ( Id.) Both Welsh and Evanthes are California residents. The First Amended Complaint alleges that WelCom makes, sells, and offers for sale certain pushcarts-including the MCX Magna Cart-that fall within the scope of the ' 708 patent. (First Am. Compl. ¶ 17, Docket No. 43.) On September 28, 2007, before transferring the ' 708 patent to Safco, Thaler sent WelCom acease and desist letter regarding the ' 708 patent. ( Id. ¶ 15.)

I. Welsh's Contacts with Minnesota

From May through July 2008, after Thaler had transferred the patent to Safco, Welsh sent several emails to Safco and had at least one conference call with Safco. On May 27, 2008, Welsh sent an email to Dave Kohner, General Counsel at Liberty Diversified, which was then Safco's parent company, suggesting "options that can be explored between WelCom products and Safco." (Wappel Aff., Ex. L, Docket No. 71.) Welsh suggested that "the Thaler patent ... be used to pressure Home Depot (and others) to drop Gleason as their supplier. If Safco does not want to spend the legal fees, WelCom products will agree to pay all legal costs." ( Id. at 2.) He asked Kohner for permission "to use the ['708] patent to police the market," and stated that he was open "to exploring possible areas of cooperation[ ] with Safco, including making the Magna Cart a line extension for Safco, either by Safco buying the Magna Cart from WelCom, or even an acquisition of WelCom." ( Id.)

A chain of emails dated June 15, 2008, and June 16, 2008, shows that Welsh scheduled and then rescheduled a conference call with Steve Greseth and Pam LaFontaine at Safco. (Wappel Aff., Ex. M, Docket No. 71.) The call took place on June 16, and in a follow-up email later that day, Welsh acknowledged Thaler's cease and desist letter. ( Id. at 1.) In that email, Welsh made the following proposal to Safco:

So I hope that WelCom and Safco can keep the U.S. design patent information to ourselves, and work together to keep knockoffs out of the U.S. market, especially Gleason, who we have reported to U.S. Customs for import fraud, and are also notifying their customers....

The sales of WelCom's "Magna Cart" line of folding carts ... are exploding in the U.S. and around the world. We continue to add major U.S. retailers and that market leadership should continue as the Magna Cart is the only Chinese mini-hand truck (to our knowledge) that has been granted exemption by the U.S. Dept of Commerce from the ... 346% anti-dumping duty.

Anyway, thanks again for the chat. I look forward to exploring areas of mutual interest and possible cooperation between our companies.

( Id. at 1-2.)

On July 16, 2008, Welsh emailed Greseth, LaFontaine, and Kohner. (Wappel Aff., Ex. N, Docket No. 71.) The email stated that Welsh had just left Greseth a voicemail and that "WelCom has just learned that Gleason Industrial has sold Costco USA a very large [quantity] of small hand trucks that are 99.6% likely to be an infringement of your U.S. design patent." ( Id.) Welsh wrote that "in light of this new development it makes little sense for WelCom to proceed with actions to nullify the patent." ( Id.) He added, "We hope that Safco will defend its patent against these Gleason jerks. And please know that if legal costs are a consideration, WelCom ... will contribute if requested." ( Id.)

On August 12, 2008, Safco filed a complaint against WelCom and Gleason Corporation.² (Docket No. 1.) Safco filed its First Amended Complaint on May 21, 2009.

Soon after Safco filed the original complaint in August 2008, Welsh traveled toMinnesota to meet with Safco. (30(b)(6) Dep. at 53.) At this meeting, Welsh "told them [to] sign over the ['708] patent to [WelCom]. That's what I insisted upon at that meeting." (Welsh Dep. at 157.) Welsh offered Safco $1,000 for the patent so that "WelCom [could] use the patent to police the market" for infringers. ( Id. at 157, 160.)

Immediately after this meeting at Safco, Welsh drove to a customer's office to make a sale. (30(b)(6) Dep. at 53.) In his deposition testimony, Welsh stated that he could not recall the name of the customer, but he described this customer as a large industrial distributor located several hours outside Minneapolis. (Welsh Dep. at 161.) During this sales call, Welsh demonstrated the MCX Magna Cart. (30(b)(6) Dep. at 52.)

II. Evanthes' Contacts with Minnesota

Evanthes and his wife are sole owners of a company that sells exclusively WelCom products. (Evanthes Dep. at 6-8.) Evanthes sold carts that allegedly infringe the '708 patent to Northern Tool + Equipment ("Northern Tool"), headquartered in Burnsville, Minnesota. ( Id. at 29.) Evanthes testified in his deposition that he was aware that Northern Tool's headquarters are in Minnesota. ( Id. at 19.) In soliciting the sales, Evanthes personally accessed Northern Tool's vendor portal on the internet. ( Id. at 28.) He corresponded by email with Northern Tool employees and representatives. ( Id. at 28-29.) In one of the emails, Evanthes stated, "Here are the product information forms for the MCX Magna Cart, both domestic and import." ( Id. at 30.) Evanthes knew that Northern Tool was likely to sell the offending carts at the Minnesota State Fair. ( Id. at 30-31.) Evanthes' LinkedIn profile discloses that he "[d]eal[s] with on all matters marketing and sales with some of the largest retail concerns in the world," and lists Northern Tool among those companies. ( Id. at 10-11, 19.)

Evanthes solicited sales from Fastenal, a corporation headquartered in Winona, Minnesota. (Wappel Aff., Ex. G, Docket No. 71.) He exchanged emails with a Fastenal representative introducing the Magna Cart and providing pricing information pursuant to a follow-up request. (Wappel Aff., Ex. C, Docket No. 71.) He sent emails to the Fastenal representative asking how to "stimulate business there at Fastenal?" and how best to "put [Fastenal's] mass/scale to work selling Equiprite/Magna Carts?" (Wappel Aff., Ex. D, Docket No. 71.) As a result of Evanthes' efforts, Fastenal sold between 14 and 94 Magna Carts per month in the first half of 2009. ( Id. at 1.) Evanthes' LinkedIn profile also lists Fastenal among the companies he deals with. (Evanthes Dep. at 19.)

Evanthes also reached out to Target Corporation, which has its headquarters in Minnesota, in an unsuccessful effort to sell the Magna Cart. He sent at least three emails to Cynthia Fong, a Target buyer, and left Fong at least one "overly long" voicemail. ( Id. at 11; Wappel Aff., Ex. B at 4, Docket No. 71.) On September 4, 2007, he emailed Fong, stating that WelCom "make[s] the uniquely innovative and useful Magna Cart(tm) line of hand trucks." (Wappel Aff., Ex. B. at 4, Docket No. 71.) In a follow-up email dated September 12, 2007, Evanthes stated, "Hopefully the sample of the Magna Cart Personal Hand Truck made it's [sic] way to your desk.... UPS shows it was delivered yesterday morning." ( Id. at 3.) Fong confirmed that she received the cart, and Evanthes provided pricing information. ( Id. at 2-3.) On April 8, 2008, Evanthes sent Fong an email attaching several photographs of the cart. ( Id. at 1.) Evanthes' LinkedIn profile also lists Target amongthe companies he deals with. (Evanthes Dep. at 19.)

III. WelCom's Corporate Form

Welsh testified that he is an officer of WelCom. (Welsh Dep. at 37.) When asked to identify WelCom's directors, he responded, "I think only me. Maybe my wife is on there." ( Id. at 38.) He testified that Evanthes is not an officer of WelCom. ( Id. at 37.) He testified that the last WelCom board meeting took place "last year. I don't remember when," and that it took place at his home. ( Id. at 38.) He could not recall sending out a notice of the most recent board meeting and he did not recall the topic of the meeting. ( Id.) He testified that WelCom has an annual shareholders' meeting because "[i]t's a legal requirement." ( Id. at 39.) He testified that he receives a salary from WelCom, and when asked...